Trade war with China highlights auto sector's need for rare-earth mineral supply

Miami Herald

7 days ago

President Donald Trump's trade war with China underscores the importance of a reliable supply chain for the automotive industry of rare-earth minerals and magnets made from them that are necessary for parts from electric vehicle motors to windshield wipers and anti-lock braking systems.
Rare earths describe 17 metallic elements with properties crucial for advanced technologies. Since a tax dispute shut down a rare-earth refinery in Vietnam over the past year, China effectively has had a monopoly on global heavy rare-earth elements processing and has major shares of processing for other rare earths. Retaliating against tariffs imposed last month by the Trump administration, China instituted new export restrictions and licensing requirements on seven medium and heavy rare-earth minerals, creating "dire" circumstances in the U.S. automotive industry if those rules are prolonged.
"The rare earth materials from China - how they are imported, not just for us but for the entire industry - has become rather complicated over the last few weeks," Kumar Galhotra, Ford Motor Co.'s chief operating officer, said on a May 5 earnings call. "It would take only a few parts to potentially cause some disruption into our production."
Trump reached a de-escalation agreement with China on May 12. For 90 days, the United States lowered its tariffs on China to 30% from 145%, and China decreased its tariffs to 10% from 125%. China also committed to removing non-tariff countermeasures imposed since April 2 against the United States, which included suspending export controls on rare earths to 28 mostly U.S. aerospace, defense and tech companies for 90 days. The licensing requirements, however, have remained in place.
The de-escalation, though, seems to have helped smooth over some of the processes in obtaining those critical minerals, said Collin Shaw, president of vehicle supplier association MEMA's original equipment suppliers group.
"It was a pretty dire situation there for a minute that the supply chain was struggling to get those out of China," Shaw recently told the Automotive Press Association. "The administration did a great job negotiating, getting some relief there, not only on the tariff level, but also ensuring that some of the components can flow a little bit easier."
But automakers and suppliers say the situation still isn't comfortable.
In a statement, German auto supplier Robert Bosch GmbH described the application process for importing rare earths for its suppliers as "complex and time-consuming - partly due to the collection and provision of a large amount of data," but declined to go into details on its supply and logistics chain for competitive reasons.
"Rare earths are essential for the production of, in particular, electric motors for electric vehicles and some sensors," spokesperson Tim Wieland said in the statement. "In the event of bottlenecks, we monitor the supply chains very closely and maintain regular contact to our suppliers and customers in order to minimize potential effects."
Chinese reliance
Rare earths are not uncommon. Their deposits, however, tend to be dispersed and not in concentrated amounts, making them more difficult to mine.
The United States is the world's second-largest miner of rare-earth minerals behind China, producing almost 50,000 tons in 2024 compared to China's almost 298,000 tons, according to the U.S. Geological Survey. China also has enormous influence because most of the world's refining and downstream magnet manufacturing is done there.
Ian Lange, a Colorado School of Mines mineral economist, said although there's plenty of "good dirt" in the United States and across the globe with rare earths, there often are environmental concerns around their mining, especially when they are found with radioactive uranium. China also has subsidized its production, allowing domestic suppliers to supply the elements for cheap and stunting investment elsewhere.
"Every time," Lange said, "a U.S. firm is like, 'Hey, we've got this good rare-earth dirt, and we think we found a processor who can make it into what you want. Here's how much we think it would cost,' all the firms who might buy them go, 'Yeah, that's about 20% more than China. We can't really risk that.'
"Finding a little bit better dirt doesn't change the fundamental equation that you can't compete with these subsidized monopolies," Lange added.
Automakers and others reliant on rare earths likely are stockpiling in case China suddenly tries to pull U.S. access, Lange said. But a Chinese cutoff could force supply chains to move and the government to provide aid - if the Trump administration and Republicans are willing to save a commodity largely used for EVs and wind energy.
"I'm guessing there would be an all-hands-on-deck, start-running situation," Lange said. "Between our stockpiles, our allies like Europe and Australia, and us starting to run, sure, it would kind of suck. But it's probably not the end of the world."
Michael Silver, CEO of California-based American Elements, an advanced materials manufacturer that supplies the auto sector and other industries, however, says closing off the supply of rare earths would benefit no one. American Elements has imported rare earths from China for decades. The firm has the licensing needed to do so for 2025, Silver said, and expects soon to hear back on certification for 2026.
"We're waiting for the other shoe to drop after these permits come out," Silver told The Detroit News, "to see if they decide, based on what's going on between the two countries and all the other negotiations, whether they're going to start using it as a process to restrict export volume."
China has done so before, Silver said, and it's also used different prices of rare earths in China and in international markets to encourage companies to invest within its borders. Rare earths were less expensive in China than outside of it. In response, the United States, European Union and Japan filed action with the World Trade Organization, which ordered China to reestablish global pricing again in 2015.
"We need to get back to multinational negotiations," Silver said, "where America uses the marketplace that China definitely wants to be in as leverage to say you can't operate in this fashion."
Trump, however, has balked largely at agreements with multiple countries, saying they disadvantage the United States by compromising on certain issues to accommodate more than one country.
"A commodity market can be manipulated by the one nation that has the dominant share of the material, and that's the issue," Silver said. "If a sovereign monopoly decides they want to put you out of business, you will be put out of business unless you can find someone who's going to subsidize your operation."
The U.S. auto industry is in a particularly vulnerable position, said Nadia Schadlow, a senior fellow at the Hudson Institute, a think tank. The former U.S. deputy national security adviser for strategy said Chinese control of rare earths and rare earth processing means "a very important industry for the American economy can essentially be held hostage."
"It's not surprising that the CCP (Chinese Communist Party) would want to use this as a form of leverage over the United States," Schadlow told The News. "They've done so in the past, even before the current tensions with President Trump over the current tariff discussions."
But a total shutdown of rare-earths exports might not happen anytime soon, Schadlow said in an email, because Chinese officials want to maintain their leverage and keep options open with the United States.
Other options
Automakers like Ford have sought to reduce their use of rare earths. Some innovators like Niron Magnets in Minnesota, which has worked with General Motors Co. and Stellantis NV, are developing ways to produce magnets without rare earths. Others are taking on China.
MP Materials in 2017 acquired an idled rare-earths mine in Mountain Pass, California, about 60 miles southwest of Las Vegas. Investing more than $1 billion in the United States, it has a facility there to separate and refine the materials, and a factory in Fort Worth, Texas, to produce metal and magnets from the elements. It's made its first deliveries of the metal to GM and expects to deliver magnets before the end of the year, which the Detroit automaker has said will be used in its EVs.
GM also has an exclusive partnership with a Lithium Americas mine in Nevada and plans to source rare earth magnets from a South Carolina manufacturing plant owned by the German company Vacuumschmelze.
"We'll continue to execute our plan to develop U.S. sources for battery cell and electric motor inputs like lithium, rare-earth metals, permanent magnets and cathode active materials," GM CEO Mary Barra said on a May 1 earnings call.
China's April actions "effectively highlighted a major strategic weakness in that 90% plus or minus of rare earths that are made in China," Matt Sloustcher, MP Materials' executive vice president of corporate affairs, told The News. "It's an untenable supply-chain risk."
A lack of investment and focus in the U.S. industry and cheaper operating costs in China contributed to the United States yielding the rare earths industry it developed to the Asian nation, Sloustcher said. Since April, with the world seeing the vulnerability of China having so much control, MP has had an avalanche of interest, he said.
"With scale and time and investment, we'll be competitive," Sloustcher said, comparing expected costs to what Japan offers. "Magnets are being sold at roughly the cost of raw materials. That is a very difficult proposition to compete against in the United States. Our strategy is around resiliency and security of supply. When we build enough scale and efficiency where we can be competitive and combine our attributes to the supply chain, the value proposition is clear for the manufacturer."
He added: "The reality is that if you don't have access to magnets, you're not making cars. That's a huge liability."
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